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Imagine Owning Adslot (ASX:ADJ) And Trying To Stomach The 75% Share Price Drop

Simply Wall St

Long term investing works well, but it doesn't always work for each individual stock. It hits us in the gut when we see fellow investors suffer a loss. Anyone who held Adslot Limited (ASX:ADJ) for five years would be nursing their metaphorical wounds since the share price dropped 75% in that time. We also note that the stock has performed poorly over the last year, with the share price down 44%. Furthermore, it's down 14% in about a quarter. That's not much fun for holders.

See our latest analysis for Adslot

Adslot isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Shareholders of unprofitable companies usually expect strong revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

In the last half decade, Adslot saw its revenue increase by 7.9% per year. That's a fairly respectable growth rate. So it is unexpected to see the stock down 24% per year in the last five years. The market can be a harsh master when your company is losing money and revenue growth disappoints.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

ASX:ADJ Income Statement, November 22nd 2019

We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..

A Different Perspective

Investors in Adslot had a tough year, with a total loss of 44%, against a market gain of about 22%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 24% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. If you want to research this stock further, the data on insider buying is an obvious place to start. You can click here to see who has been buying shares - and the price they paid.

Adslot is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on AU exchanges.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.